Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Thursday, October 29, 2015

15 Exemptions available to Private Companies not subsidiary to listed or unlisted Public Companies

MCA issued a notification in June 2015 regarding applicability of a few sections and filing of forms with MCA in respect of Board Resolution and Shareholder Resolutions U/s 117 “Resolution & Agreements To Be Filed”.  The private companies shall take the benefit of exceptions, modifications, exclusions and exemptions as given by MCA but shall also protect the interest of their share holders.

There are 15 exemptions available to Private Companies  but not to private companies which are subsidiary of public companies whether listed or unlisted.

Exemptions to Private Companies:
1.     Private companies can enter transaction with Related Parties. Related Party Transaction shall not apply to transactions between a holding, subsidiary or an associate company of such company
2.     MOA and AOA provisions shall override the provisions of Companies Act with respect to Kinds of Capital and Voting Rights
3.     Provisions with respect to further increase of issued share capital by Right Issue and ESOS will not be applicable to Private Companies. ESOS can be approved by way of an Ordinary Resolution instead of Special Resolution.
4.     Restriction on purchase of its own share by a private company or giving loan to purchase its shares shall not apply a private company if all the conditions given below are fulfilled:
-       No other Body Corporate has invested in its Share Capital
-       Borrowing from bank is less than the lower of the two i.e 50 crores or twice of its paid up capital
-       Company has not defaulted in repayment of such borrowings
5.     Private company is exempted from the provisions of Section 73(2) a to Section 73(2) (e) regarding prohibition on acceptance of deposit from its members equal to Paid up Share Capital and free reserves but DPT -3 is to be filed with MCA
6.     Provisions with respect to provisions under Section 101 to Section 107 and Section 109 will be governed by the articles and In case, there are no provisions related to section 101 to 107 & 109 in the Article, then provisions mentioned in the Act shall be applicable. These provisions are related to Shorter Notice, Explanatory Statement, Quorum of the meeting, Chairman of the meeting, Proxies, restrictions on Voting Rights whether by Show of hand or demand of Poll.  
7.     Private companies are not required to file MGT-14 for reporting the transactions covered under 117(3) of meetings of board and its powers with MCA..
8.     OPC, Dormant Companies, Small Companies and Private Companies with share capital less than Rs.100 Crore are exempted from the provisions of Section 141(3) regarding eligibility, qualification, disqualification and number of audits. That means audit of such companies will not be counted in the maximum limit of twenty.
9.     Section 160 and Section 152 related to the right of a person other than retiring director who is not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible for appointment to the office of a director at any general meeting subject to certain conditions and there are restrictions on certain rights of such director. Such provisions are not applicable on Private Companies.
10.  Section 162 which provides for appointment of directors to be voted individually at general meeting is not applicable on private companies and a private company can appoint more than one director by passing single resolution.
11.  Section 180 is not applicable on private companies which restrict certain powers of the board only subject to approval by general body.
12.  Section 184 which provides restriction participation in resolution for entering into transactions with the company or wherever interested and disclosure of such interest is not applicable on private companies. Now director of a private company may participate in the meeting where a contract or arrangement is to be discussed and after disclosure such director is going to be interested in transaction with the company.
13.   Section 185 restricting loan to director is not applicable on private company now even all the conditions are fulfilled as mentioned :
-       No other Body Corporate has invested in its Share Capital
-       Borrowing from bank is less than the lower of the two i.e 50 crores or twice of its paid up capital
-       Company has not defaulted in repayment of such borrowings
14.   Section 188 regarding related party transactions is not applicable to a Private Company and member of a private company can participate in voting for resolution approving the contract or arrangement wherein such member is interested .

15.  Section 196 regarding appointment of managing director, whole time director or key managerial person is not applicable to a private company so shareholder’s approval for such appointment and filing of MR-1 are not mandatory to be filed.

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